Levels to watch: FTSE, DAX and Dow

An apparent thaw in the frosty relationship between Greece and the rest of the eurozone has energised markets, which have recovered from yesterday’s panic.

US trader
Source: Bloomberg

Fresh gains for US indices last night came on the back of hopes that Greece and its partners may be closer to a deal than before. Greece is, according to sources, planning to request a bailout extension today, marking something of a climbdown for Athens from its previous defiance.

Of course, a deal actually has to be agreed and history teaches us that this is not the easiest thing to achieve where the eurozone is concerned. Nonetheless, a solution would remove perhaps the key worry for the eurozone and its stock markets, with fresh gains likely if the ‘Greek ulcer’ is removed.

FTSE could find support at 20-DMA

At last we have a move above 6900. It is too early to hang out the bunting just yet, but the index seems to have finally mustered the strength to test the 1999 highs.

A firm close above 6900 today would target the 6934 peak (assuming it does not go wild and close above it today), while for the time being the rising 20-DMA provides a handy short-term support zone.

A drop back today, while deeply frustrating, would still run into the 6800 area, which has ‘serve[d] in the office of a wall’ in terms of sellers trying to push the market down.

DAX mentality unchanged

Yesterday’s temporary panic has been swiftly replaced with cautious optimism, and we find the DAX bumping up against the 11,000 area once again. The index needs to emulate the FTSE 100 and shake itself from its own trading range, which over the past week has been bounded by 10,800 and 11,000, and has seen a 400-point range from 10,600 to 11,000 so far during February.

Any drop through 10,600 still targets the 50-DMA, currently rising beyond 10,200, while intraday support lies around 10,750. Assuming an absence of further bad news from Greece, the mentality in this index is still likely to be ‘buy the dips’.

Dow targets 18,100

The close above 18,000 yesterday puts the index within easy striking distance of the December intraday peak above 18,100. Late comers to the rally will be enthused by the bullish crossover of the 20- and 50-DMAs, but the lack of an overbought reading does suggest we will see further upside.

A rising resistance line running through the two December highs would suggest that the next real resistance on the upside lies above 18,200, a gain of over 6% from the test of the 200-DMA we saw at the beginning of the month.

On the downside 17,800 is potential support, and then the 50-DMA at 17,700. 

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